The Hindu Business Line : Foreign cos, arms may be allowed non-resident chiefs

Conditions apply
At least one director will have to be a resident
Disclosure norms like that of domestic entities
Silent on ‘place of business’ and winding up of businesses

Richa Mishra

New Delhi, Oct 27 Subsidiaries of multinational companies (MNCs) and foreign companies looking to set up business in India would be able to have a chief who is not a resident of the country.

The Ministry of Corporate Affairs, which is working on a new company law, is likely to relax the existing requirement where the managing director of an MNC subsidiary must be an India resident. The new law is likely to propose that at least one director on the Board should be a resident.

However, foreign companies and MNC subsidiaries will have to follow the disclosure norms applicable to domestic companies. “This is to ensure proper compliance of domestic regulations by such entities,” official sources said.

Separate chapter

The Ministry is expected to propose a separate chapter for such companies under the new law on the lines of what has been suggested in the Concept Paper on Company Law.

“Most of the proposals of the Concept Paper have been incorporated in the proposed law with minor modifications,” official sources told Business Line.

A special chapter, which is being dedicated to foreign companies, suggests various regulations to be followed by such entities, including maintenance of accounts, filing of accounts with Registrar of Companies, cost audit, inspection, investigation, registration of charges, and creating debenture trusts. These provisions will be applicable to both foreign companies and those incorporated in India.

The chapter is also likely to include definitions of certain terms such as certified, director, and prospectus, which are absent in the existing Act. The proposed provisions will apply not only to companies doing business in India, but also those with a share transfer or share registration office in the country.

In fact, the proposed law will also recognise Indian Depository Receipts (IDR) and Global Depository Receipts (GDR).

‘Place of business’

The proposed revamped law is likely to remain silent on principal place of business and winding-up provisions of such companies.

Officials said that while the place of business would be defined by the Reserve Bank of India, which governs the operations of such companies, cross-border insolvency has not been dealt with in the proposed law because it is a complex issue and requires more in-depth examination, sources said.

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